State regulators weigh need for stronger cellphone privacy rules

At issue before the Public Utilities Commission is whether it's time to update the state's more than two-decade-old telephone privacy rules, developed at the dawn of the hand-held cellphone era.

Consumer groups have urged the five-member commission to open an investigation. But the wireless industry, led by giant AT&T Inc., is opposed to any changes. Commissioners, meanwhile, are divided on the question set for debate next month.

Commissioner Catherine Sandoval, a law professor who specializes in telecommunications, said it's time to consider whether changes are needed. "New forms of personal information and new capacities for tracking that information" were unforeseen when earlier laws and regulations were written, she said.

In particular, Sandoval noted that wireless carriers now track a user's location and match it to demographic data. Some telephone companies, such as AT&T, Sprint and T-Mobile, reportedly have installed apps on customers' mobile devices that collected and transmitted personal information, such as Internet use, to private data-mining firm Carrier IQ without the cellphone owners' consent, she said.

In their petition to the PUC, the Consumer Federation of California, the Utility Reform Network and the Privacy Rights Clearinghouse insisted that the commission has the legal jurisdiction and the obligation to update its cellphone privacy rules to reflect the "constantly changing" telecommunications market.

Forcing tracking software on unwitting customers "flies in the face of our [state] constitutional right to privacy," said Mark Toney, executive director of the Utility Reform Network.

Taking a different view from Sandoval is Commissioner Mark Feron, an investment banker and venture capitalist. Echoing the arguments submitted by the wireless industry, Feron said there's "a lack of documented examples of actual breaches of customer privacy by telecommunications corporations."

He has concluded that it's not clear that a review of telephone privacy protections is needed at this time.

AT&T, Verizon Wireless and a number of prepaid cellphone companies have been lobbying the commissioners and their staffs. How the issue will be resolved by the PUC is uncertain. Only Sandoval and Feron have publicly disclosed their views. The commission, which meets in San Francisco, will hear public comments before taking up the issue Jan. 16.

In recent years, the PUC has taken a hands-off approach to nearly all issues involving wireless rates and regulations. However, that laissez-faire attitude might be changing in light of smartphone owners' fears about protecting personal data.

According to a September 2012 study by the Pew Internet & American Life Project, more than 50% of people surveyed said they opted to not install certain apps on their wireless devices after they learned how much personal information would be shared.

In PUC filings AT&T says Sandoval's proposal presents no concrete evidence that new regulations are needed, and, "in fact, could have negative consequences for consumers, app developers who contract with telephone corporations, and for California as a promulgator of unique regulations that would chill investment and innovation."

Beth Givens, director of the Privacy Rights Clearinghouse in San Diego, was unimpressed by AT&T's view. "Leaving privacy protection in the hands of companies is not good public policy," she said. "It certainly does not result in good consumer protection."

Lack of action at the PUC doesn't mean that the debate is over on issues surrounding cellphone privacy at the highest levels of state government, said state Sen. Alex Padilla (D-Pacoima), chairman of the Senate Energy, Utilities and Communications Committee, who said he was unfamiliar with the issue pending before the PUC.

"It's a topic, I would say, of daily conversation in the Legislature," said the senator, who has an engineering degree from MIT.

To that end, Padilla was the author of a Senate resolution passed this year that directed the California Law Revision Commission, which advises the Legislature on legal issues, to look into the need for reforms regarding access to information from citizens' communications via mobile and Internet devices.

But Richard Holober, executive director of the Consumer Federation of California, said he was skeptical that Padilla or other lawmakers would defy powerful lobbies, such as AT&T, by attempting to slap tougher regulations on the wireless phone business.

"That the Legislature would do anything to advance the cause of telephone privacy is an illusion," he said.